Loyalty? … What Loyalty?

Godiva's newly announced customer loyalty program is a yawner.
Godiva is a late entry in the customer loyalty program sweepstakes.
Godiva Chocolatier has just announced its first-ever loyalty program for customers. It promises to ply chocoholics with all sorts of goodies — from free in-store confectionery gifts to free shipping on online orders. Anyone over age 18 is eligible to sign up with no obligation to purchase … and for those who activate their loyalty membership before June 13th, there’s even a chance to win a complimentary “chocolate party” for up to 25 friends at their nearest company-owned Godiva boutique store.

How wonderful. Now, pardon me while I stifle a big yawn.

For a program that seems pretty decent actually, how come it all sounds so predictable … so mundane? That’s because everybody’s doing it. (And Godiva is really, really late to the party.)

A recent report issued by consulting firm Colloquy contains some interesting statistics about loyalty programs. With more than 1.8 billion loyalty memberships on the books, the numbers have never been higher. (This translates to a whopping 14 loyalty program memberships per U.S. household.)

These stats underscore the fact that loyalty programs have migrated well beyond the original airline frequent flyer and hotel frequent stayer programs to encompass seemingly every corner of consumer activity today.

But according to Colloquy, fewer than 45% of all loyalty programs are actually active, in that they’ve had at least one instance of activity in the preceding 12 months. “The relative ratio of active to inactive loyalty program members suggests that more than half of all program memberships are merely names in a database,” the report states. “The implication for marketers is clear — the era of growing membership rolls just for the sake of growth is over.”

What this suggests is that companies have done a better job of signing people up for loyalty programs to begin with … but not nearly enough to keep them engaged as regular customers over time.

Could it be that the single most popular tactic — offering a one-time 15% or 20% discount on purchases as a “sign on” incentive — has attracted customers who cheerfully take advantage of the special activation offers, but have no compelling reason (or even any intention) to participate over the long haul?

If that’s the case, the loyalty is only skin deep … and the current economic conditions will likely spark even more instances of lax participation.

But what if companies tailored loyalty programs to individual customers based on their unique profile and actual purchase history? Would better customer conversion result — along wth improved ROI?

It’s more challenging to run a tailored loyalty program … and it requires more focus and attention than many marketing department personnel are willing to devote to it. Moreover, there’s no guarantee that consumers won’t simply “take advantage,” without spending any more on merchandise than they would have done without the loyalty program being offered in the first place.

But with the sorry participation rates currently being experienced with loyalty programs … it’s certainly worth a shot.

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